ABC’s of Franchising:  Site Selection

One of the most important business decisions you will make is choosing a location for your business. Location can directly impact profitability and can mean the difference between success or failure for your business. When researching business models, look closely at how a franchisor handles site selection and what resources they provide to their franchisees. Here are some points to consider:

Do they have well-defined site criteria?

To know what site works best for a business, you first need to have clearly defined your core customers. Does the brand have a product or service uniquely tailored to meet the needs of a specific demographic or niche market? Does the brand utilize the latest technology and best practices available to collect lifestyle and geographical data on this demographic and to identify trade areas where its core customers live and shop?  

Well-defined site criteria are evident in a brand’s continuity rate. If it has a history of allowing bad locations, the continuity rate will suffer. Conversely, a good continuity rate is indicative of fine-tuned criteria, meaning the brand has determined a successful formula. It knows where its core customers are. It knows just how much square footage and frontage area is necessary for operational efficiency. There are requirements in areas such as visibility, accessibility and parking. The brand also knows what national anchors and co-tenants create high retail synergy. All of this comes together to create guidelines that help franchisees chose an optimal site, maximizing their revenue potential. 

What analytic tools and resources does the brand make available to its franchisees?  

One of the benefits of being a franchisee is having the support and resources of a large brand; this is especially true in the area of site selection. Is the brand utilizing the latest technology and best practices available in real estate and how are they leveraging it to perform market research on behalf of its franchisees? What ways do they identify and evaluate prospective sites?

Support should be comprehensive, taking you from A to Z in the real estate process. Ideally, a brand approaches the relationship dedicated to being partners with you in finding the best site for your business. Is there a real estate committee to review site choices and offer recommendations and discourage sites that are less than ideal? There should be professionals available to you to offer advice and answer questions throughout the site selection and real estate process.

Do they offer a list of preferred vendors and brokers to help bridge any knowledge gap?

Most franchisees are not real estate experts, making it important to have access to people who are. This is especially important when it comes to the onerous legal language of leases. Leases are locked in for a minimum of five years, even as much as ten years, so making the right choice and negotiating the best terms upfront is crucial. In today’s landlord market, you need an expert on your side who is looking out for your best interests. Can the brand provide a resource list of preferred lease consultants who understand the unique needs of the brand?

Does the brand have a resource list of local real estate brokers who have intimate knowledge of the market and regional trends?  Brokers often have established relationships with landlords and developers that can be leveraged on your behalf. Shopping center exclusivity contracts could narrow down your site options and a broker with local knowledge can help you navigate such roadblocks.

Are there defined territories and priority policies in place?

A franchisor’s market development should be strategic. It should take a cooperative approach with franchisees and also set expectations systemwide. When franchisees know where they stand it helps create a positive and supportive team culture. What policies are in place to ensure that real estate selection is handled fairly throughout the brand? How are territories defined? What can you expect when it comes time to scale your business and as the brand itself expands?

Choosing a successful location is one of the most important decisions you can make as a business owner, which can sometimes make the process feel daunting. However, with the right franchisor, you will be able to leverage the support and resources they provide to set your business up for success and maximize your revenue potential.

For more information on how Sport Clips Haircuts approaches real estate and site selection with their more than 1,800 stores and counting, click here.